Inmode Ltd (INMD) 2020 Q1 法說會逐字稿

Good morning. Welcome to the InMode First quarter 2020 earnings conference call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Miri Segal of MS-IR. Please go ahead.

Thank you, operator, and good day to everybody. I would like to welcome all of you to InMode's First Quarter 2020 Financial Results Conference Call. With us on the line today are Mr. Moshe Mizrahy, Chairman of the Board and CEO; Mr. Yair Malca, CFO; and Shakil Lakhani, President of InMode North America.

Before we begin, may I remind our listeners that certain information provided on this call may contain forward-looking statements and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website.

Changes in business, competitive, technological, regulatory and other factors could cause actual results to differ materially from those expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. As such, we can give no assurance as to accuracy of our forward-looking statements and assume no obligation to update them except as required by law.

Moshe will begin the call with the business update and pass it over to Shakil to discuss our North American operations, followed by Yair with an overview of the financials. We will then open the call for the question-and-answer session.

I'll now hand over the call to Mr. Moshe Mizrahy, InMode's CEO. Moshe, please go ahead.

Thank you. Thank you, Miri, and thank to all of you for joining our First Quarter 2020 Financial Results Conference Call. With me and on the line today from Toronto, Dr. Michael Kreindel, my co-Founder and the Chief Technology Officer of InMode. Michael is also a Board member; from Houston, Texas, Mr. Shakil Lakhani, our President of North America; from Irvine, California, Mr. Yair Malca, our Chief Financial Officer; and from New York, Dr. Spero Theodorou, our Chief Medical Officer. Also here with me in Israel, Rafael Lickerman, our VP, finance.

All of us will be happy to answer any questions you have, following our thoughts. I would like to start my address by sharing with you a quote that described precisely InMode strategy, in light of the COVID-19 pandemic, never let a good crisis go to waste. Who said that? Mr. Winston Charge, Prime Minister of Great Britain, in February 1945 at the end of World War II in the Yalta Conference, where he himself, Stalin and Roosevelt decided on the formation of the United Nation, as a framework for creating opportunities at the end of the war.

InMode has adopted Churchill belief, although none of us ever hoped for having something -- anything like the COVID-19 crisis, but we will not let this crisis go to waste. Our strategy is to turn it into an opportunity.

In this call, Shakil, Yair and myself will communicate to you, our strategy during and post the COVID-19 event.

Now for results. In the first quarter of 2020, InMode generated revenue of $40.4 million, a 32% increase from the first quarter of 2019, and the $12.6 million net income on a non-GAAP basis, a 20% increase from the first quarter of 2019. Also, in the first quarter of 2020, we derived approximately 61% of our U.S. revenue from our surgical platforms. Our surgical platforms engage in minimally invasive and deep subdermal ablative treatment. In addition, 30% of our revenue, derived from our recently introduced proprietary hands-free platforms. And only 2% of our U.S. revenue, derived from traditional laser and noninvasive RF platforms.

In Q1 2020 -- Q1 2020 was not a full quarter for InMode. Although, we started working at a full speed, but the COVID-19 event was beginning to take its toll. The fact that our headquarters, are based in Israel, and that we have presence in China, enable us to realize early enough, that COVID-19, which broke out in China would soon spread to other parts of the world. This realization led our management to make a decision to tactically shift marketing and sales activity and focus on Europe and the United -- and North America in timely manner and capture as much business as possible in the months of January, February. This decision turned out to be a wise one, since our -- since in the month of March, the entire world came to stand still.

Our non-GAAP operating margin for the first quarter of 2020 was 30% as compared with 34% in the first quarter of 2019. The decrease can be primarily be attributed to the fact that our sales cycle in March was interrupted by the COVID-19. And as a result, the marketing and sales activity and the related expenses did not result in sales, at the end of the quarter.

So overall, our revenue in the first quarter represent 2 months of sales and 3 months of expenses. InMode management has many years of accumulated experience. What we learned from the 2008, 2009 crisis is that every crisis eventually come to an end. Therefore, we decided not to downsize the company and not to layoff any of our employee, but rather to prepare ourselves for the day after COVID-19.

Therefore, we immediately implemented 5 key initiatives: to enhance our marketing and sales network; to enhance our relationship with the physician and with potential customers; to expedite our R&D activity, mainly for products that will fit the market post, called COVID-19; and to upgrade our infrastructure of manufacturing, logistics and the financial; and to develop marketing and sales program, that will motivate physicians to purchase InMode's platform, as part of their recovery plan for their clinic.

Now let me describe each one of those 5 initiatives. With regard to our marketing and sales network, in Q1 2020, we continue to hire experienced direct reps, including experienced rep that were laid off by -- from our competitors. We also established a new marketing subsidiary for marketing and sales in France. With regard to enhancing our relationship, with physicians, we have established a live stream virtual medical training framework through our InMode University platform. And we conducted over 50 webinars. We were surprised at the numbers of physicians and salespeople who participated. In this training, this initiative led to a creation of library of training video, which is a great asset, moving forward.

With regard to R&D activity, we focused our R&D projects on developing platforms and new procedure, which we believe will become the standard of care post-COVID-19. This focus has been mainly on 2 technologies. The first one, minimally invasive procedure. This is our main technology, we believe that we will definitely become the standard of care for facial and body reshaping. Since we believe that patients will stay away from hospitals and hospital posterior will stay away from full anesthesia and other shortcoming of full surgical procedure and will prefer customized clinic-based aesthetic surgical procedure.

The second technology is the hands-free technology, we develop and we are developing hands-free procedure. Once again, this procedure will customize -- will be customized, private procedure, that maintain social distancing in the privacy of the physician clinic. Defining and selecting the right product portfolio for post-COVID-19 is important, since we believe that physician will be looking for unique platforms that will enable them to recover and restart their clinic activity. We know that as regard to medical equipment, prices always accelerate innovation adoption. We believe that medical aesthetic physician will refrain from buying another traditional laser. They probably already have 4, 5 of these laser in their clinic.

And that InMode innovative procedure is an excellent fit to the new and dynamic demand post-COVID-19. Our current R&D pipeline includes 3 new platforms and procedure, which will be released to the market, starting the third quarter of 2020.

In addition, we are continuing our R&D activity for new medical communities to develop mainly, minimally invasive clinic-based procedures, mainly for ENTs, gynecologists and ophthalmologists. With regard to upgrading our infrastructure, as we stated before, we finalized the setup of an additional manufacturing facility. In addition, we expanded our network of vendors and suppliers. We have also improved our IT support for financial, inventory and supply-chain management. With regard to developing marketing and selling program, for the day after COVID-19, we understand that the physician will face several difficulties, once they reopen their clinic. We also understand that our platforms create a perfect fit for the recovery of this clinic. Therefore, we developed a sales program, that included 3 packages: financial package incentives; training; and direct -- and direct-to-consumer marketing.

Although the COVID-19 pandemic has caused a temporary stop on all elective aesthetic surgical procedure, InMode is encouraged by the positive global development.

First, there was a decrease of new cases worldwide, and this downward trend is continuing on a daily basis.

Second, gradual return to work, which already started.

Third, elective surgeries are gradually being permitted, in the United States and other countries.

Based on this assumption, InMode believe, that starting June 2020, and throughout the third quarter, InMode's business will gradually begin to pick up. Therefore, InMode has remained positive, with regard to its business prospects.

We believe that the demand for body and face reshaping will increase post-COVID-19, since people want to get back to their normal life and leave the feeling of quarantine and lockdown behind. As such, aesthetic will be a major element in regenerating the public morale. For that, as I said before, we decided not to downsize the company and not to layoff any of our employees. On the contrary, in Q1 2020, we hired new direct salespeople around the world and enhanced our sales and marketing network outside the U.S. In addition, although, we were approved by U.S. government-sponsored fund providers to apply for their Paycheck Protection Program, which would enable us to get funds from the government, we decided, unlike other companies in our industry, not to take and to leave the PPP money for small businesses, like physician clinic, who need it most. We believe that this is a social responsibility to our customers and vendors.

Now to the guidance. Since visibility of 2020 is low, InMode's management has decided to withdraw the previously announced full-year guidance. And elected not to provide a new detailed guidance. Currently, based on our assumption, our revenue outlook for the full-year 2020 will not be significantly lower than our revenue in 2019. And we will maintain gross margin of 84% to 86%. Last but not least, throughout this crisis, we have taken good care of our employees, worldwide. And have followed local and regional guidelines to prioritize the health and welfare of our employee and customers. Now, I would like to take the turn and -- to turn the call to Mr. Shakil Lakhani, our President in North America, who will go into more detail, on our activities in the North American market. Shakil?

Thank you, Moshe. And hello, everyone. During the quarter, we continued to expand our sales force with the hiring of experienced talent in North America. We believe that in doing so, we will be able to capitalize, once things return to normal. Although, the industry has come to a standstill, due to the pandemic, we have used this time to strengthen our relationships with our customers. We've also been able to use the time to further develop our sales force, using multiple platforms for training, and also through establishment of InMode University, a virtual training platform for the training physician and staff.

We've successfully hosted numerous virtual seminars through InMode University, since the crisis began and experienced a great amount of interest. In the beginning of the year, we continued to credential ourselves by attending several aesthetic and medical conferences. Additionally, our team has 4 new studies, that have been accepted by major peer-reviewed journals. Coming out of the crisis, we expect to see a windfall of pent-up demand for body and facial reshaping procedures, as consumers aim to return to normal life, this will include them looking and feeling their best.

Furthermore, we believe that our minimally invasive as well as our hands-free devices, Evoke and Evolve, will be increasingly attractive to the post-pandemic population. Based on historic data, we believe that people will seek to avoid high dollar invasive hospital-based surgeries and opt for minimally invasive experiences at physician offices. We also believe that our hands-free devices will be appealing to surgeons and patients as well. Currently, Evolve is the only hands-free device for the treatment of skin, subdermal fat and muscle toning, while Evoke is the first hands-free device for treating skin laxity on both the face and the submental area. Looking to the second half of 2020, we'll be preparing our sales force, for the launch of 2 new platforms, keeping up with our previous momentum. We expect these new platforms to become significant contributors, going into 2021. Now let me hand over the call to Yair to review our financial results in detail.

Thanks, Shakil. Good day, everyone. Total revenue in the first quarter of 2020 grew 32% to $40.4 million, with gross margin of 85% on a GAAP basis. This growth was driven, primarily, by the continued expansion of InMode's direct sales organization in the United States. Additionally, InMode continued to gain traction in the international markets, with international revenue growing 49% year-over-year. GAAP operating expenses in the first quarter of 2020 totaled, approximately, $28.3 million, a 72.8% increase from the first quarter of 2019.

Sales and marketing expenses increased 63.1% in the first quarter of 2020 compared to the first quarter of 2019. On a non-GAAP basis, operating expenses totaled $22.3 million in the first quarter of 2020 compared to operating expenses of $16 million in the first quarter of 2019, an increase of 39.6%.

GAAP operating margin was 15% in the first quarter of 2020 compared to 33% in the first quarter of 2019. Non-GAAP operating margin in the first quarter of 2020 was 30% compared to 34% in the first quarter of 2019. This decrease was primarily attributable to the increase in sales and marketing expenses due to continued expansion of InMode's direct sales organization in the United States as well as an increase in research and development expenses.

GAAP diluted earnings per share in the first quarter of 2020 were $0.15 compared to $0.28 per diluted share in the first quarter of 2019. Non-GAAP diluted earnings per share in the first quarter of 2020 were $0.30 compared to $0.29 per diluted share in the first quarter of 2019. We completed the first quarter with a strong balance sheet. As of March 31, 2020, the company had cash and cash equivalents, marketable securities and deposits of $201.7 million, out of which $70 million are net proceeds, raised at the IPO in August 2019. On the cash flow front, the company generated $6.1 million from operating activities for the first quarter of 2019 -- 2020. With that, I will turn the call back to Moshe.

Thank you. Thank you, Yair. I will turn it now to the operator for questions.

(Operator Instructions)

Our first question is from Matt Taylor from UBS.

The first thing I wanted to ask you about was, you made some comments on recovery, which were helpful to understand, how you're thinking about it. I guess, in talking with your customers, I'm curious to hear, if you've got any sense for how they're preparing to reopen in some of these places, that are going to have the lift of the lockdown on elective surgeries? And if you could give us any color on what you think, they're doing to get patients back into a funnel and maybe any insights on how long or what normally they would have, in terms of surgical procedure scheduled?

Shakil, I believe, you should answer that.

Yes, sure. Matt, so after answering this, I'll actually pass it on to Dr. Theodorou, who will also be able to -- these are numerous discussions as are why, with physicians. So based on some of the people who've been opening up, as the states have been opening up. We've actually seen more some pent-up demand, which we were expecting, but we didn't know for sure, if that is indeed what was going to happen. So we have actually seen that, people have been doing virtual consults, throughout this entire time. And most of our physicians, that are slowly returning back, I don't want to paint an overly rosy picture, as things open up. However, in areas where they have opened up, we have seen that they've actually been quite heavily booked. Dr. Theodorou, did you want to comment on this, please?

No, I think, it's absolutely true, Matt. And thank you for your questions. They're always excellent questions. I think, it's important to delineate the fact that, the elective surgeries that are coming on board, right now, through the hospital system are stratified according to different levels, typically, as to what has been prioritized prior to the pandemic opening. So the plastic surgery, cosmetic surgeries and the things that we're involved in, are typically, delegated or relegated to a different position. However, the majority of what we do is office space, and the majority of the cosmetic procedures out there are usually done in the offices efficiently and certainly in New York. So it falls right into what we have always seen back in '08, '09, that the demand is not going to go down. The patients want this really bad, and we're getting e-mails and virtual consults, steadily through this whole time. But having a deal in the office, like 2008 and 2009, where the practices that adopted technology and minimally invasive procedures did very, very, very well. So it falls back into our treatment gap, population and it falls back into the fact, that we have our technology positioned in such a way, where these procedures have a short downtime, office-based will come across very powerful. So we're quite optimistic. And talking to physicians everywhere, I get calls constantly about local anesthesia, how to administer it, how to get better at it because there is awareness out there, at this point, that was not present before the pandemic as far as general anesthesia and ventilators are concerned. The public now knows what ventilators means. They don't want to get stuck on one, which means general anesthesia is a lot more scarier now, than it was before.

As a result, the local anesthesia technology combination, that we provide, is becoming quite interesting and definitely a demand for learning how to do these things. And that's part of our virtual training program as well. I hope that answers your question, Matt.

Yes, that was a lot of great color. And I guess, as a follow-up to that on the same theme here, given you're seeing some pent-up demand, maybe you could tag team this again and just talk about, both as a physician and an officer of the company. What do you think, you'll have to do differently, over the next coming months, as things kind of start to slowly reopen. Does your practice's in New York are the ones, that are harder hit prices, are there things you're going to have to do differently, operationally? Is that going to be limiting and/or we've also heard some practices saying, look, we're going to do more cases per day. We're going to run more hours. So what do you think, we could see for places like New York and for other places on different ends of that spectrum?

Okay. Matt, great question. Certainly, New York is probably going to be the last to open up, regarding that sort of the feeling, I get, regarding what's going on out there. But the American Society of Plastic Surgery has given up -- so it has given recommendations, as to how to structure things. Spacing appointments, where no one's in a waiting room. So the flow is different, obviously, you're going to have to extend the hours. That's one thing. Virtual consultation is definitely a big deal and be able to accomplish as many things as possible prior to coming in. right?

They've given recommendations as well as to the types of anesthesia and how to be protected and -- during general anesthesia intubations for patients. But again, that doesn't necessarily fall for us. The social distance spacing in the clinics is not just for plastic surgery patients, it's across the board. All clinics are being set up that way. So they're just going to have to stay open longer, in order to accommodate that volume. And that's part of the discussions, that are taking place.

As far as protection, masks and shields. And also as it relates to testing, discussed about just testing patients, prior to elective surgery, about 2 to 3 days prior to elective surgery, you have to do a COVID testing is what they're recommending. And as a result, right after that, to quarantine yourself, prior to surgery. Some physicians have gone to the extent over in the West Coast about putting in the consent forms per surgery, adding a COVID clause, saying that, if you do have something done, it's not our responsibility, as to if you got it or not.

So certainly, in some way, it's a different world, but we have to always remember that demand to look good, it's not going away. You look back in the recessions or everything, lipstick and cigarettes is what we always say. So we're a strong believer that we will overcome these things, and it just has to operate a little differently.

Got it, got it. Maybe, I could sneak one last one in there on that. I think that's a very interesting point, and investors would be curious to hear more about the context, that you had from your experience in the financial crisis. We all have to look good for our Zoom calls, as the I'll make. But what did you see in your practice? And what can you tell us anecdotally about some from your colleagues, in terms of how they were able to grow, during that period of time?

Absolutely. So what we saw during that time was very, very interesting. We were a technology-based practice that, at that time, it was Cynosure and Smartlipo, which was a technology. And during that time, what happened is 2 things. The price cost for actual procedure was around -- the magical number was between 3,000 to 5,000 for one area of liposuction. And your average patient was doing 3.8 areas, a year, during that time. But what was interesting was that the age dropped. So the parents at that time were concerned to tighten their belts, but the younger patient population went from 36.4, our population, down to 26.5. So the younger population was a lot more aggressive in seeking procedures, plus they have a disposable income, at the time, that no generation ever had before. So $2,500 for a laptop, $600 for a smartphone, for them to spend $5,000 for an area at the time, which was Smartlipo was not a big stretch, especially, because it was under local, they were awake, they could tweet their friends about it, talk about it, and it wasn't as scary.

So the practices that did establish and did adopt technology in this respect, did very well. We published our experience in -- after those years, in 2012, the article came out, and we had done about 1,000 cases in under 18 months.

So in this respect, minimally invasive, in this type of environment is uniquely positioned to do well. And if you correlate that, together, with injectables and the companies that are pushing injectables and BOTOX and fillers, as a minimally invasive, in their respect, they did as well also. So the numbers that dropped were the major operations, Matt, the ones that required hospitalization because it was a lot more expensive to pay for general anesthesia and a hospital fee. So in line with the democratization of plastic surgery, like you always mentioned and we also have adopted, I think, we're perfectly positioned for these types of procedures in the office. And obviously, the recession and now a little different, but we see those trends continue, as the majority -- a lot of the patients calling are also young.

But that's just not limited to them. There's a different element here, where we have 2 groups of patients, that, one group would be the young group, who is going to go and do this, regardless. And then the second group, which is different than before, it gives you -- so exasperated because of the quarantine, they're going to want to come out and do something. And we're practically getting a lot of time to think in this respect. So this group will come out and do it. However, they will not engage in large procedures because of the fear of, basically, surviving a pandemic and end up getting -- will end up getting something that will give them a nice result in 48-hour downtime, done in the office, and they can go back to their homes. So those are the patterns we're predicting, which are a little different but very similar along those waves.

Our next question is from Kristen Stewart from Barclays.

I was wondering, if you guys could just remind us about the payback on the capital equipment component for most practices and just what the general timeline looks like and just the number of procedures that one would have to do in this environment?

Sure, Kristen. This is Shakil here. So typically -- so during a normal -- during normalcy, I should say, and not at a time of pandemic. We've typically been able to see some physicians, who've paid off the equipment in 2 to 3 months and others that take 18 months. It depends on the physician, the practice and what they do and obviously, their staff. However -- and how aggressive they are in marketing. However, during this time, of course, it's going to be a little different. Now, overall, as an average, we typically see people pay these things off, anywhere between 6 to 12 months on average. And the reason for that is, most of the technologies that we have, whether it's our

hands-free or minimally invasive, typically are, within those price ranges, that Dr. Theodorou just mentioned. So somewhere between $2,500, all the way up to $7,000 or $8,000. Hence, the equipment cost is then easier to pay off for the physician. Does that make sense?

Yes. That's perfect. And then just a question on the gross margins. I was pretty impressed with the ability of gross margins to remain in that 85% to 86%. Is that, even, despite what might be kind of a fall off, which I would expect to see in the second quarter. Is there anything to kind of think about, just in terms of like absorption or any sort of fixed cost or overhead? Or is that just representative of maybe some of the contracting, that you have with some of the contract manufacturing partners that you use?

Okay. This is Moshe. I will answer that. 85% gross margin for us is a must. It's not nice to have. So basically, every product or every platform. So every hand piece of indication that we will develop from the drawing board, we have our own formulas, we know exactly what will be the gross margin. Since we do some focus group to understand what are the needs, what will be the price of this platforms, how much will cost us to manufacture it, and therefore, we know what is the gross margin.

Furthermore, we are very lean and mean company. So we don't have a huge fixed cost. We walked through outsourcing company who manufacture for us. And therefore, we have only 3, 4 people in our organization who are managing the entire logistics, supply chain and manufacturing. Some of the manufacturing we do in-house, we have a small facility, mainly for special laser and optical-based hand pieces. But most of the other electronics and medical electronics, we do outside. Regarding fixed cost, I'm sure you noticed that our G&A is very low compared to competitors. We are less -- about $5 million a year. And if you look at Cutera, they do $24 million a year on G&A. So fixed costs are very low, we're -- most of our cost is not fixed cost. And an 85% gross margin, basically, we have 3 levels to ensure that. One, we manufacture in Israel in a very high sophisticated facility, and I'm sure that manufacturing in Israel is a little bit cheaper than manufacturing in the United States. Second, when you generate RF energy compared to optical energy, and I'll give you an example, if you want to generate 20 joules of laser energy compared with 20 joules of RF energy, it costs about 50% to produce the RF compared to energy on the same level of energy. So this is another thing. And second, we have a lot of experience in designing and development of a bipolar RF equipment. I believe, that we are the most experienced and have all the knowledge and the IP to manufacture such equipment. The second thing, that determines the gross margin is, of course the pricing of the system. Since our platform average cost in the U.S. is between $120,000 to $130,000. If you compare that to a laser equipment, which is about $70,000, $75,000. And the reason why we are able to charge high price is because once the technology is protected with several patents, second, it took us 6 years to get FDA approval. So competitors will -- if they found a way to overcome the IP and develop something different for the same application, it will take them a long way and long time to come even close.

And the third element is, of course, the market share. Everybody now knows, what is the body type, what is safe type, will be very difficult for others to come close. So it enable us to charge higher prices for our system. We know how to design a system. We manufacture in a very lean and mean, I would say, operation. And we will continue to maintain the 85% gross margin. Even in the first quarter, when we had the difficulties, finding sources for several subcomponents and subassemblies, since the Chinese operation shutdown, in January, we managed to get 85% gross margin. And I can tell you that just to make sure that the facility will continue to run, we bought components for higher price. But even with that, we went down by 1% in the first quarter. And I'm sure that, that's -- once we go back to normal, we will get this 1% to our gross margin, again. So did I answer your question?

Yes. That's very helpful.

Our next question is from Kyle Rose from Canaccord.

So I just had a couple of follow-ups, on some of the previous commentary you provided. I appreciate all the extra color on this earnings call, given some of the uncertainty, out there. So maybe just help us understand just a little more information, specifically, around the packages or the focuses, you've put together to help develop the sales and marketing programs for the physicians. I think, you talked about 3 of them that have -- one has a DTC advertising component, a financial component, a sales trading component. Maybe just help me understand, what kind of programs you had in place, prior to this? And then how these will actually structurally change, I guess, the recovery for the physician customers and what the early feedback was on those programs?

Shakil?

Sure. Kyle, so essentially, what we've done -- you asked about what we did, historically. So we would have certain things in place, third-party partners of ours, who would help physicians generate business, lead generation, open houses, in order to get patients through the door, educate them. During this time, what we've had to do is, we've had to pivot and do a complete 180 by going virtual, like many other companies, of course. So in doing that, we've actually created similar platforms that we were using before, which were very successful, but we've had to bring them over to the E-Experience or the virtual platform. So when it comes to virtual consults with patients or virtual open houses, these are things that we're working on with our third-partner parties, in order to actually help these physicians get back and up and going. Now in terms of packages, we are going to help some of our physicians out. As we start and continue to distribute equipment. It will take some time, as they open up. We definitely want to go in and make sure that, we take care of our physicians. And let them know, that we're here for them, as we always have been. But now more than ever, there will be certain things that we put together from a package type of situation to help them get up and going. A lot of people are suffering with cash flow issues, right now. Because they've been closed for so long. So it's our job and we feel it's our duty in order to actually assist them with this, especially because they are our customers. So for those who are going to be looking at incorporating products like Evolve or Evoke, for example, that are hands-free, we're going to have certain things, as there are patients that want to get these things done. There are people that are, obviously, waiting to get out there, once things return back and Dr. Theodorou mentioned, the psychology of being pent up, we are seeing -- are being held up. We have seen that. So we do plan on incorporating these things. The response from our physicians so far is good. We are in the early stages of this, but we look forward to continuing to move along that line. Does that answer your question?

It does. And then, I also wanted to talk about -- when you look at the U.S. business in the Q1, particularly, the 30% of revenue is coming from the hands-free, that's a great start, out of the gate. I guess, help us understand, maybe, what you -- what surprised you with that launch? What went positively versus negatively? Obviously, COVID impacted, but just trying to understand what stage of that launch we're in? And how big of a runway you think that could be from a 2020, 2021 perspective?

Yes, that's a great question, Kyle. So we actually did an official launch at our sales meeting, which happened towards the end of January. So frankly, we really only had, technically, about a month. That was with the Evoke. So Evolve, we obviously, launched last year, in the latter part of 2019. And we had some tremendous success. As I mentioned earlier, it is the only device that addresses skin, it addresses fat and it tones a muscle, all in one device. So typically, if a physician has to purchase that from a competitor or a number of different competitors, they're looking at double, or if not triple the price. So we've been able to put that into one platform, which we believe is the reason that we saw so much great success with Evolve in a short period of time. So we really, on Evolve, we just kind of scratched the tip of the iceberg. We certainly saw that there was a tremendous amount of interest initially. And then we saw in March, as practices started closing up and elective surgeries were no longer allowed in many -- majority of the States. We did see a drop there. With Evoke, Evoke is the only device, as I mentioned earlier, that's able to do facial reshaping, but from a hands-free standpoint. So as Dr. Theodorou mentioned, physical distancing, social distancing, people will be in that mindset for some period of time, we believe. And I think, this kind of sets it up, where they can go in, they purchase the treatment, they ship down, and do some -- how to strap it on or their staff will, and then they have this procedure done. That procedure, as that product, as I said, we really only launched it, in the latter part of -- in January. So we really haven't even seen what type of runway we have with that. However, knowing that it's first of its kind and the history that we have in the industry. Typically, when something is new and novel and it excites physicians, which we've seen very early on, it's actually a very, very powerful thing.

Great. And then, I'll just sneak in one last one here. I know that you guys tend to keep things tight to the lift, just given competitive purposes, but you talked about a couple of launches in the second half of the year. Any insights you want to give as far as the anatomical focus or some of the technologies we might see there? Then I'll hop back in the queue.

Sure. So I'll leave it at this. It'll be minimally invasive, is one of the products. And the other one is a build up on something that we already have, but taking it to a totally different level. Sorry to be vague, but for the reasons that you mentioned. Hopefully, that gives you enough color, though. It will be minimally invasive, addressing a treatment, that people have tried to address for years, that have not had very much success, but we will take a different approach to it, using our minimally invasive expertise in specialty. And for the other product, it'll be -- let's just say, it'll be a

building on our RF micro name.

Our next question is from Jeff Johnson from Baird.

Moshe, maybe start -- just haven't heard yet anything there much, on the international markets. Especially, what have you been seeing maybe in Brazil, India, we think, is a big opportunity, but obviously, they have been dealing with some COVID issues there. So maybe how to think about India in the near to intermediate term? And also, any update on plans to enter China?

Okay. Well, it depends on the territory. Brazil right now is just because the COVID-19 started in South America, a little bit later than in the rest of the world, all the countries in South and Latin America are now almost close, Argentina, Brazil and others. I'm sure, we announced last earnings call that ANVISA has approved minimally invasive product and the minimally invasive platforms. And we plan to do an introduction and launch with a big event in June, which, of course, we will delay. Right now, there was nobody there is operating, by the way, in Brazil, there are more plastic surgeons than in the United States, and they're all waiting for that. We did all the training. We have the luminary doctors. Dr. Spero Theodorou and other doctors were supposed to be there for the opening to do training, but everything is delayed. Like in Argentina and other countries in South America, I would say that South America right now, is in the same stage that Europe was -- have been in the beginning of March or during the second week of March, it will take some more time to get -- to see what will happen there.

So in Brazil, everything is ready. The registration, the approval of the ANVISA, the training of the salespeople, of the distributors, who are not going direct in Brazil and not in Argentina. The same in Mexico and other countries in South America. Everything is ready. We sold a little bit in the fourth quarter. But then in the first quarter, Brazil still -- stands still. In Asia, the situation is a little bit different. China, we see some opening, right now, and the fact that we just received 2 CFDA approval will help us, hopefully, this quarter. But the third quarter, I believe, in China, will be a great quarter for us. For the first time, we have 2 approval, we can sell to hospital, we can sell to private clinic, which we can cover all medical communities right now, plastic surgeons, dermatologists. We have several American doctors who will help us, who are well-known there, like Dr. [Ward Rodri]. And then, our well-known in Texas and in the United States, the plastic surgeon, Spero, will help us. Dr. Erez Dayan and others. And we're putting some plan right now, how to launch the InMode RF, the minimally invasive, which is the major part of our sales, all over the world, right now, in China. In countries like Korea, we're doing well. We even sold a few systems in the first month. The pandemic is well controlled there, and we will continue. Hopefully, the second wave of pandemic in Japan will end soon, and we will continue to sell there. Those big -- we started a big momentum there, with a lot of marketing investment. We don't want to lose it.

India, as you know, we opened a subsidiary, late 2019. Right now, India is in the complete curfew, up until the 14th of May. We are following the situation there. We have 4 salespeople. We have -- we sold nicely on Q4. And hopefully, sometime from the middle of May until the end of June, we will do a couple hundred thousand dollars there as well. The same is in Australia. We opened a company last quarter. And we have the complete infrastructure, including training, salespeople, technical, office, inventory control, et cetera. We try to keep it, right now, lean and mean, and not to spend a lot of money. But hopefully, this quarter, sometime towards the second half of this quarter, we will see some revenue from there. In Europe, it depends, which country, U.K., we believe -- U.K. and Spain are coming out. And sometimes during May and June, we will see some revenue generation there. In Italy, we don't know yet. It depends what -- how fast they will go out of the curfew and the lockdown. But we also believe that the month of June, something will open there, and we will see some activity as well. Surprisingly, the East block, Russia and other countries, we got some orders, already in the first quarter and also in the month of April. Hopefully, it will continue, since -- although, we don't know exactly the situation there. Because they are not publishing the real numbers. But hopefully, that will generate a little bit -- some of the revenue for the European part.

Middle East is again -- depend on the country. Israel just started to pick up again. We sold a few systems in the last few weeks and also in the first quarter. Right now, elective surgery, aesthetic surgery, et cetera, is allowed in Israel. They opened it. And also, hopefully, we will see some reigniting the momentum in this country. Overall, outside U.S. and Canada, we believe that in Q2, things will start gradually, to pick up again, during the second half of the quarter. How much the revenue will be? Visibility is very low. We don't know what will happen with the second wave of the pandemic. Hopefully, not as bad as the first one. But we're still optimistic.

Very helpful. But Dr. Theodorou, I want to go back to a point you made about testing patients, maybe a few days before procedure. Given where we are as a country from a testing perspective. Do you think that could be a rate limiting step #1 in some of these procedures coming back? Do you think all doctors are going to require that for an aesthetic procedure? Number two, can you just remind us the penetration rate of InMode technology in the plastic and aesthetic surgeons office? My gut feel is that, even if patients are somewhat slow to come back, they'd still have interest in your technology or in the InMode technology because of the marketing advantage it might bring, things like that. So even if patients are slow to return, there's still an opportunity to go in and sell systems to these offices because they're going to be looking to increase their visibility or competitiveness. In the field. So I just would like to take your temperature on that as well.

That's a 2-pronged question. Thank you for asking excellent questions. I'll start with the second part, first. I think, it's very important to delineate, that we're not just a technology company, that sells boxes or systems. We develop new operations, that require our technology to do it. So in this respect, we're very unique. And thanks to Moshe and his support, and then thanks to [Mishka] to be able to develop an idea that's on the napkin and to hit the street to be able for the distribution to take place. It's 8 to 9 months on average. So that's unheard of. So those advantages are very, very significant. Because we use a lot of our surgeons, as almost in a crowdsourcing kind of way. We get our feedback. We know what problems are out there that need to be solved in plastic surgery, that haven't been solved and we go after that. And that's been our model. So in a way, if you're selling a new operation, as a physician, addressing a problem, that was not addressed before. Immediately, you have a huge advantage over anybody else, who doesn't have that technology. So that's sort of our core DNA and the ability to do R&D and innovate so quickly and deliver a product. We'll put physicians that have our equipment, in a very good position to take advantage and, especially, delivered in a way that we deliver it. As far as testing, I don't think, it's going to be an issue. Remember, this is not the first time any physician office is involved in testing product procedures. You go back to the days HIV. We require that for testing, and that never really limited anything. It just made sure that the doctors were careful.

Initially, it might have been an issue, but most of the doctors, basically, have adapted to that and it never comes up anymore, other than the fact that there's recommendations as far as protective gear and what to wear and double glove and things like that.

So I anticipate the same thing to happen here. Initially, the recommendations for face masks and clear shields and all that's in place. And as we move along, I think, those standards will be sort of loosened up, but they're no different than the universal standards, we all practice, as surgeons. Patients refusing to have surgery because they need to have COVID test, I see that highly unlikely. I think, at least, remember, I'm in New York. So it's a little different. But from the physicians I have talked to across the country, they don't see this as a rate-limiting factor because there's been so much education about that from the government, that most patients are okay with it. I have yet to speak to physicians, saying my patient is refusing to have this done, or is not aware of it or does not want to do it. So does that answer your questions?

It does, yes. Very helpful. And then last one, just Shak or Moshe, do we have a U.S. and Canadian sales force updated count? I think, you were at 110 coming into 2020, just where that's gone with some of the new hires?

Yes, sure. So we're actually now at approximately 135, and that's Canada and the U.S.

This concludes our question and answer. I will now turn the conference back over to Moshe Mizrahy, Chairman. Go ahead.

Hi, everybody. Again, thank you for joining us today, and thank you for your question. You know how to reach us. If you want to continue discussion or question to us, we will -- please e-mail to us anything that you need, any clarification or information, either myself, Shakil, Yair, Dr. Michael Kreindel and Dr. Spero Theodorou will be happy to answer. I hope, that everything is okay with you and your families. I wish you well and safe. Thank you. Thank you for joining, again. Thank you all. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.